Commodities still more interesting; housing surprise

What market went limit-up?

European shares retreated from a six-year high as Credit Suisse Group AG led banks lower. Natural gas looked to go for its biggest three-day decline in eight years. Lowe’s, the second-largest U.S. home-improvement chain, gained in early trading after saying its board approved a $5 billion share buyback. The yield on Greek 10-year bonds fell 14 basis points to 7.21%, the lowest since 2010. Sales of new single-family homes started 2014 with surprising strength, rising 9.6% in January to a seasonally adjusted annual rate of 468,000, the fastest pace in more than five years.

Equities: The March E-mini S&P 500(CME:ESH14) is down slightly this morning, after making a recovery from lows after the housing report was released. The market rallied above our key 1851 level overnight, but could not sustain the rally, and is now down a couple points on the day. Even with the strong housing number, the market may actually look at this number in terms of the Fed tapering process continuing unabated, and thus might head lower because of that view. Considering the market looks to be having trouble staying above 1851, we believe the market is looking a bit susceptible to a down-move, perhaps testing the 1820 bottom of the recent range.

Bonds: March U.S. 30-year bonds(CBOT:USH14) are up 9 ticks on the day to 133’29. We believe the bonds may be holding their strength for a couple of reasons: 1) the S&P 500 is having trouble rallying above 1851, and 2) the continued political uncertainty in the Ukraine. A key line in the sand is 133’16 for this market. As of now the bonds are holding above this level, thus we believe there is some underlying strength to this market. The next key data release for the bond market is the February employment report.

Currencies: Yen futures(CME:JYH14) are down 4 ticks to 97.85. We believe the yen might be getting ready for a move higher, possibly approaching its recent highs of 99.25. We believe this is more likely to occur if the S&P 500 heads lower. Other key currencies are down against the U.S. dollar today: euro(CME:ECH14) (down 73 ticks), Swiss Franc(CME:SFH14) (down 68 ticks), Aussie dollar (down 51 ticks). Our key area for the euro is 1.3760 that resistance level held nicely today. The euro could be susceptible to selling as long as it stays below 1.3760.

Commodities: May coffee(NYBOT:KCK14) and sugar(NYBOT:SBK14) have settled down from their recent blistering rallies. Coffee is down 1.5% to $1.7365 while sugar is down 1.53% to 17.41¢. April natural gas(NYMEX:NGJ14) is down another 13.5¢ to $4.56. May soybeans and March oats(CBOT:OH14) continue their recent strength, particularly oats, which are limit up today.

About the Author

Anthony Lazzara, CEO of Newport Beach, Calif., commodities investment firm Lido Isle Advisors, spent 10 years as a trader and floor broker at the Chicago Board of Trade and Chicago Mercantile Exchange. Anthony has significant experience in the energy, fixed income, and equity futures markets. After being a long-time independent futures trader, Anthony saw a tremendous opportunity to educate investors on how to invest in professional traders. Anthony is now focused on his duty as CEO of Lido Isle Advisors.